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3/8/2006
Geico Overcharges the Uneducated Nationwide
Geico is charging 40 percent more nationwide to insure those with blue collar jobs and less formal education.

Geico logo 40 percent more
The nation's fourth largest automobile insurance company, Geico, charges a janitor with a high school diploma an average of forty percent more for car insurance than it charges a college-educated attorney. New Jersey Assemblyman Neil M. Cohen (D) introduced legislation yesterday to abolish the practice after stories appeared describing its effect on Garden State motorists. The rating method, however, is not limited to New Jersey. It is used in forty-three states with the nation's other top insurance companies under competitive pressure to adopt the same practice nationwide.

TheNewspaper examined Geico policies covering a 30-year-old male with a perfect driving record in Louisiana. By changing only the level of education in the online price quote system, we found a graduate of a four-year college paid $823 for insurance compared with the $1088 rate for having only a high school diploma or associates degree -- nearly a third more.

In California, we also found that one's job description played a significant role in the price paid. Again holding all of the variables constant, this time we changed the job description for each price quote. We found that an executive would pay $1054 for insurance, a technician $1182 and a clerk $1398 -- again, nearly a third more. By manipulating both the education and job status variables in Louisiana, one could pay in extreme circumstances 124 percent more.

Eric S. Poe, vice president of New Jersey Citizens United Reciprocal Exchange suggests there is no correlation between education or occupation and the likelihood of an individual getting in an accident.

"The insurance industry is not concerned about whether you will have an accident or not," Poe said. "They are concerned as to whether you will want to be compensated for that accident."

Poe works for a not-for-profit insurance provider that does not want to adopt Geico's scoring tactics to compete in the New Jersey market. He sees it as a thinly veiled means of avoiding state and federal restrictions on insurance scoring based upon race and income. He also sees it as a means of generating an accurate list of names for marketing purposes.

"Get the names of these rich individuals and sell them homeowners [insurance]," Poe said. "The most valuable list that anyone can sell is a list that is factual on affluent people."

Such marketing is key to Geico's success. Most people know of the company through its familiar advertising campaign. With $502 million spent on ads last year, Geico became the number one advertiser in the country. "And I can't wait to spend more," Geico parent company Berkshire Hathaway's chairman Warren Buffett wrote in a letter to shareholders.

The chart shows a sample of the different rates charged to white collar and blue collar employees in forty-three states.

Article Excerpt:
State/City
White Collar
Cost
Blue Collar
Cost
Increase
Alabama
Tuscaloosa
$485 $550 13%
Alaska
Anchorage
0%
Arizona
Tempe
$569 $669 18%
Arkansas
Little Rock
$612 $756 23%
California
Los Angeles
$1,326 $1,754 32%
Colorado
Denver
$844 $1,125 33%
Connecticut
Hartford
$698 $924 32%
Delaware
Newark
$605 $807 33%
Florida
Miami
$730 $842 15%
Georgia
Atlanta
$1,005 $1,611 60%
Hawaii
Honolulu
$445 $834 87%
Idaho
Aberdeen
$448 $504 12%
Illinois
Chicago
$557 $619 11%
Indiana
Indianapolis
0%
Iowa
Iowa City
$395 $494 25%
Kansas
Kansas City
0%
Kentucky
Lexington
$595 $661 11%
Louisiana
New Orleans
$1,080 $2,426 125%
Maine
Portland
$401 $471 18%
Maryland
Baltimore
$859 $1,144 33%
Massachusetts
Boston
n/a
Michigan
Detroit
$1,845 $3,540 92%
Minnesota
St. Paul
$538 $826 54%
Mississippi
Biloxi
$547 $729 33%
Missouri
St. Louis
$517 $649 26%
Montana
Adler
$604 $1,161 92%
Nebraska
Omaha
$398 $569 43%
Nevada
Las Vegas
$729 $1,289 77%
New Hampshire
Concord
$819 $1,024 25%
New Jersey
Princeton
$456 $604 32%
New Mexico
Belen
$511 $638 25%
New York
New York
0%
North Carolina
Advance
$341 $394 16%
North Dakota
Grand Forks
$505 $594 18%
Ohio
Cleveland
$355 $507 43%
Oklahoma
Achille
$720 $800 11%
Oregon
Carvallis
$455 $536 18%
Pennsylvania
Philadelphia
$541 $636 18%
Rhode Island
Adamsville
$547 $613 12%
South Dakota
Alcester
$429 $611 42%
South Carolina
Alcolu
$543 $611 13%
Tennessee
Nashville
0%
Texas
Houston
$613 $875 43%
Utah
Salt Lake City
$423 $563 33%
Vermont
Wilmington
$192 $246 28%
Virginia
Fairfax
0%
Washington
Seattle
$610 $1,041 71%
West Virginia
Morgantown
$574 $765 33%
Wisconsin
Milwaukee
$436 $544 25%
Wyoming
Bosler
$402 $574 43%
Washington D.C.
$590 $708 20%
National Average 40%

Source: NJ CURE. "White Collar" represents a President with Law Degree. "Blue Collar" represents a Custodian/Janitor with High School Diploma. Rates are based on a 25 year old single male with 50/100/25 coverage and a $500 deductible for Comp/Coll for a 2006 Ford Taurus LX. Minor variables may have changed from state to state such as PIP coverage limits, and if they were chosen it was always the default selection on GEICO.com, but for each example the selection was consistent for comparison purposes.


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